Spread Bet on William Morrison Supermarkets | Trade William Morrison
Wm Morrison Supermarkets (LSE: MRW) have been around for a long time. It was founded originally in 1899 in Bradford, and became a publicly traded company in 1967, though the Morrison family still owns about 15% of the shares. It is reckoned to be the fourth-largest chain of supermarkets in the UK, coming behind Tesco’s, Asda, and Sainsbury’s. In 2004 it took over Safeway’s in a £3.4 billion deal, which brought this mainly northern supermarket chain to the south. Unfortunately, the takeover was not smooth with Safeway changing its accounting system just before selling, and Morrisons suffered as a result issuing a profit warning for its fiscal year 2005 – the supermarkets chain’s first ever profit warning in decades of trading.
By June 2005, Morrison was forced to issue another five profit warnings which only added to its perils, with the acquisition leading to a chain reaction of problems extending well into 2006. After the disappointing times, Morrisons did some rationalization and disposed of stores which did not make sense in its portfolio, such as the Channel Island’s Safeways and the company started recovering in 2008. However, Morrison’s market share has still fallen from 12.3% a year ago to about 11.7% [January 1013].
You can see from this monthly price chart that Morrisons recovered well from those times, and is now trading in a range. You can also see that the 2008 financial crisis had little effect on its price. There was some bad publicity in 2007 regarding selling alcohol to underage customers, but this does not seem to have had a lasting effect.
The daily price charts show much more activity, with the last few months being in a definite downturn. For the technical trader, normal principles apply with the prices tracking the Bollinger Bands on all time-scales, as can be seen above.
As with all retail companies, quarterly announcements of the amount of trade and the profit or loss can affect the prices, and unless you are prepared to move quickly or take a chance, it is usually a good idea to stay out of the market when such announcements are expected. The retail supermarket business is competitive, which means in the long-term Morrisons must make the right decisions to stay in the market, but this will not affect short-term trading.
How to Spread Bet on Wm. Morrison Shares: Rolling Daily
Morrisons is a well-known northern supermarket chain, which is expanded through the acquisition of Safeway’s, and now competes with the big boys. The current price for a rolling daily spreadbet is 267.73 – 268.27. Suppose that you think that the price will fall, you may be tempted to place a short or sell bet for £15 per point on this stock.
If in time you are proved to be correct in this bet, the price may fall to 242.31 – 242.85, and you could close your trade and collect your winnings. The spread bet went on at the selling price of 267.73, and it closed at the buying price of 242.85. The difference between these two prices is 24.88 points, which is your gain. Multiplying by your stake of £15 per point, your winnings come out to £373.20.
It is in the nature of the financial markets to not be predictable, and quite possibly your spread bet may have been in the wrong direction. If so, you might find yourself having to close your trade for a loss when the price goes up to 285.12 – 285.65. To calculate how much you have lost, once again you must first figure out the number of points. 285.65-267.73 is 17.92 points. At £15 per point, you would have lost £268.80.
Many spread traders find that it is convenient for them to use stop loss orders, which require their spread betting company to close a losing trade for them. This saves time checking the charts, and can save some money because the trade will be closed as soon as the price reaches a certain level. If you had placed a stop loss order on this trade, the bet may have been closed for you when it reached 279.31 – 279.79. Working out your losses now, 279.79 minus 267.73 is 12.06 points. This works out to a loss of £180.90.
Wm. Morrison Futures Based Spread Bet
For the spread trader who takes a longer view of the market, a futures style bet may be appropriate. It is important to note that you are not locked into holding the bet any longer than you want to, so if your profit target is achieved or your unrealized losses have become too much, then you can close the trade at any time. However if you keep hold of the trade, there is no further charge right up until the expiration date.
The current price for a far quarter futures bet on Morrison’s is 268.19 – 271.43. Imagine that you think the share price is going upwards. You might choose to place a long bet on this stock, staking, say, £12 per point at the buying price of 271.43. It could turn out that you are correct and this bet wins. Perhaps the price would go up to 295.63 – 298.54. If you closed your trade at this point you would gain 295.63 minus 271.43 points, or 24.20 points. At £12 per point, this is a win of £290.40.
If on the other hand the price went down after you placed your bet, you could choose to cut your losses by closing when the price reached 249.62 – 252.45. Working out as before, the difference in points is 271.43-249.62. That is 21.81 points, but this time against you. That means you have lost £261.72 for your chosen stake.
One of the secrets of successful spread betting is to minimize your losses, as even the best of traders lose some of their trades. Many choose to use stop loss orders to automatically close a losing trade. If you had done that in this case, you might find that the trade would be closed earlier, resulting in less loss. Say the stop loss order closed when the price was 255.04 – 258.13. You have lost 271.43 less 255.04 points, or 16.39 points, and that would cost you £196.68.
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